Tuesday’s bond market has opened in positive territory even though there is little in terms of relevant headlines to drive trading. Stocks are mixed with the Dow up 80 points and the Nasdaq down 71 points. The bond market is currently up 7/32 (3.95%), which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.

There is no relevant economic data set for release today or tomorrow. It is noteworthy, to some degree, that the benchmark 10-year Treasury Note yield closed below 4.00% and remains there this morning. This has been a very strong resistance level that stopped the August and September rally in mortgage rates. Staying below this threshold creates the possibility of a downward trend in yields again, this time possibly touching 3.7%. This would be good news for mortgage shoppers because mortgage rates tend to track bond yields.

On that note, it is a bit surprising to see the resiliency in bonds (and mortgage pricing) when stocks are at or near record highs and we have a huge inflation report coming later in the week. It seems as if bond traders are expecting to see consumer inflation held steady or eased in September. That is a pretty heavy bet because stronger than expected inflation readings could prevent the Fed from cutting short-term interest rates later this month and should drive bond yields and mortgage rates higher. We will see what happens come Friday.

Tomorrow’s 20-year Treasury Bond auction will give us an indication of investor appetite for longer-term debt. This is relevant because mortgage rates are based on long-term securities. If this sale is met with a strong demand, particularly with international buyers, bond prices may rise during afternoon trading. This could lead to an improvement in mortgage rates shortly after the results are posted at 1:00 PM ET. On the other hand, a lackluster interest in the securities may create selling in the broader bond market and lead to a slight upward revision to mortgage rates tomorrow.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.